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TMI Blog2022 (12) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... is not an incorrect claim (143(1)(a)(ii) word 'increase in income' inserted w.e.f. 01-04-2021 in clause (iv) of sec. 143(1)(a) 3. CIT(A) has erred in confirming the addition, inappropriately considering the amendment to sec. 43B and explanation to 36(1)(va) is inserted w.e.f. 01-04-2021 by Finance Act, 2021 is retrospective. The appellant prays to cancel the same as explanations is inserted and applicable w.e.f. 01-04-2021 (i.e. A.Y. 2021-22 only). Appellant prays for allowing deduction for education cess paid by the appellant firm. 4. CIT(A) has erred in not adjudicating the Additional Ground raised for not allowing deduction for Education Cess paid by the Appellant company Rs. 2,789/-. 5. Appellant prays for just and equitable relief. 6. Appellant prays to add, alter, amend, take additional grounds, submit additional evidence during appellate proceedings. 2. The first issue involved in this appeal is the disallowance of employees' contribution to Provident Fund as well as ESI. It is the case of the assessee that as per various decisions of Pune Tribunal it has been held that if the employees' contribution to provident fund is paid before the due date of filing of ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' contribution towards the EPF and ESI considering the due date under the relevant Acts and Regulations. Secondly, the A.O ruled by virtue of section 30(1)(va) read with section 2(24)(x) of the Act that such amounts received by the appellant-assessee constitute "income". Those amounts could not have been allowed as deduction u/s 36(1)(va) of the Act when the payment was made beyond the relevant due date under the respective Statutes. In other words, as per the A.O as such amounts were paid beyond the due date as prescribed under the respective Acts the right to claim such amounts as allowable deduction while computing the income was lost for ever. The assessee's plea was unsuccessful before the I.T.A.T. and ultimately the Hon'ble Gujarat High Court also rejected the plea of the assessee. As noticed earlier, on this issue since there was a division of opinion amongst various Hon'ble High Courts, therefore, Hon'ble Supreme Court granted Special Leave to Appeal in all these cases. It was observed and held by the Hon'ble Supreme Court as follows: "51. The analysis of the various judgments cited on behalf of the assessee i.e., Commissioner of Income-Tax v. Aimil Ltd.; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me - by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)).The other important feature is that this distinction between the employers 'contribution (Section 36(1)(iv)) and employees' contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessee's liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer's contribution which is its primary liability under law - in terms of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed." 4. In the aforesaid judgment, the Hon'ble Supreme Court has analysed the legal essence of the welfare legislations such as ESI, EPF, etc. which are primarily for the benefit of the employees. The employees' hard earned money are contributed to these funds whereby their contributions are given to the employers to be deposited as per these enactments. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Grounds No. 1, 2 and 3 of assessee's appeal of the assessee stands dismissed. 7. The next issue in this appeal is with regard to the disallowance of deduction on Education cess and secondary and higher education cess. This particular ground has to fail in view of statutory Amendment carried out to section 40(a) of the Act with retrospective effect covering the year under consideration. Further, we find, the Kolkata Bench of the Tribunal in the case of Kanoria Chemicals and Industries Ltd. Vs. Addl. CIT in I.T.A. No. 2184/Kol/2018 dated 26-10-2021 has held that the Education cess is an additional surcharge levied on income-tax and hence it partakes the character of Income-tax. Accordingly, it was held that the Education cess is not allowable as deduction. The Tribunal also noted the judgment rendered by Hon'ble Bombay High Court in the case of Sesa Goa Ltd. 117 taxman.com 96 and by Hon'ble Rajasthan High Court in the case of Chambalal Fertilizers and Chemicals Ltd. Vs. Jt. CIT (I.T.A No. 52/2018 dated 31-7-2018) wherein it was held that the Education Cess was allowable as deduction. However, the Tribunal observed that the judgment rendered by the Hon'ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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